Just Required #5

6 Mid-South Auto Leasing leases vehicles to consumers. The attraction to customers is that the company can offer competitive prices due to volume buying and requires an interest rate implicit in the lease that is one percent below alternate methods of financing. On September 30, 2021, the company leased a delivery truck to a local florist. Anything Grows. The fiscal year for both companies ends December 31 10 points The lease agreement specified quarterly payments of $3.400 beginning September 30, 2021, the beginning of the lease, and each quarter (December 31, March 31, and June 30) through June 30, 2024 (three-year lease term). The florist had the option to purchase the truck on September 29, 2023. for $6,800 when it was expected to have a residual value of $11.200. The estimated useful life of the truck is four years. Mid-South Auto Leasing's quarterly interest rate for determining payments was 3% (approximately 12% annually). Mid-South paid $28.360 for the truck. Both companies use straight-line depreciation or amortization. Anytning Grows incremental interest rate is 12%. Hint: A lease term ends for accounting purposes when an option becomes exercisable if it's expected to be exercised (i.e., a BPO). (FV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Calculate the amount of selling profit that Mid-South would recognize in this sales-type lease. (Be careful to note that, although payments occur on the last calendar day of each quarter, since the first payment was at the beginning of the lease, payments represent an annuity due.) 2. Prepare the appropriate entries for Anything Grows and Mid-South on September 30, 2021. 3. Prepare an amortization schedule(s) describing the pattern of interest expense for Anything Grows and interest revenue for Mid- South Auto Leasing over the lease term. 4. Prepare the appropriate entries for Anything Grows and Mid-South Auto Leasing on December 31, 2021. 5. Prepare the appropriate entries for Anything Grows and Mid-South on September 29, 2023, assuming the purchase option was exercised on that date. Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Prepare the appropriate entries for Anything Grows and Mid-South on September 29, 2023, assuming the purchase option was exercised on that date. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to nearest whole dollar.) General Journal Credit No Date Debit 1 September 29, 202 Amortization expense 1,872 Right-of-use asset 1,872 N September 29, 202 Lease payable 21,286 X >> Interest expense Cash 718 29,951 3 September 29, 202 Cash 3 3,400 Lease receivable lo 2,682 X 712 X Interest revenue